Fundamentals of Human Resource Management 6th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart,Patrick Wright

Exercise 11

401(k) Plans Are a Missed Opportunity for Many
At organizations that offer employees a chance to save for retirement with a 401(k) plan, about three out of every ten employees do not participate. Even those who do participate typically contribute less than the amount their employer will match. That means employees are leaving money on the table, and employers are not getting the full motivational potential out of their compensation package.
Employers can address the enrollment problem by setting up a plan that automatically enrolls employees unless they opt out. Studies suggest that automatic enrollment can cut in half the share of employees who do not participate. With automatic enrollment, the employer must notify eligible employees about their benefits and rights, communicating before the automatic enrollment and once a year afterwards.
Even with automatic enrollment, employees fail to make the most of 401(k) plans. One study found that when enrollment was automatic, the average employee saved a smaller percentage of his or her income.
Logically, employees who make an effort to enroll would also prioritize saving more for retirement. Furthermore, organizations with automatic enrollment match on average a smaller percentage of workers' contributions than other employers offering 401(k) plans. Automatic enrollment evidently boosts overall participation at the expense of participants' individual retirement savings. Thus, to prepare for their eventual retirement, employees need information and motivation to save, not just access to a plan.
Another way employers are addressing low enrollment rates is by offering the benefit without the permitted waiting period. Employers may require employees to work for a set period-typically six months, but up to a year is allowed -before enrolling in a 401(k) plan. This saves the cost of administering plans for high-turnover workers, but it also makes saving enough more difficult and lowers enrollment rates. Employees seem to forget about enrolling after they join a company, sign up for other benefits, and get busy with their jobs. Some employers, including Massachusetts Mutual Life Insurance and Biogen Idec, therefore let employees enroll immediately, saying it helps them attract and keep talent.
How might an HR department encourage higher rates of enrollment and saving